Thursday, September 28, 2006

ESPN Mobile: Lessons Learned?

For a sports-media business project that cost $150 million and just folded, a little Thursday-morning quarterbacking isn't so inappropriate.

And I'm a little obsessed with the intersection of sports and business. So let me dust off my Harvard MBA hat...

Why did ESPN Mobile's original strategy fail?

I've got a very simple way of explaining it, which I've been peddling since the day the product was announced:

ESPN *ON* a phone is hot.ESPN *AS* a phone is not.

ESPN has always been about the content; the day it decided it wanted to get into the handset and phone service business, it veered away from that zone.

The vast majority of consumers were never going to switch handsets; they were never going to switch carriers. Not simply for ESPN.

ESPN is a huge part of fans' lives, but it's as content. A person's phone (and service) is a person's infrastructure.

It's as apples-oranges different as the clothes you wear versus the veins in your body. Put in media terms, it's like ESPN laying cable to be wired to your TV and asking to be your cable provider, instead of simply concentrating on the content and having an independent cable provider pipe it through.

So the bad news is that ESPN spent $150 million to find this out. (Why didn't I pitch my expert-MBA consulting services way back when?!)

But the good news is that the new direction -- to simply license the content to any wireless carrier that wants to pay for it -- isn't just better than the old one; it's been the optimal strategy all along.

ESPN gets to go back to what they do best: Creating content. They license it to as many carriers as they can. They reach as many fans as possible.

The remaining question is how much they'll charge the carriers to have the ESPN content -- and what kind of cost will be passed along to the consumer?

Will consumers be asked to pay some monthly nominal fee, HBO-style, for ESPN content? Will it be more than nominal?

Will carriers offer it for free, in an effort to entice consumers to switch carriers? (Know what? That's not ESPN's problem anymore, which is the entire point.)

Some of us saw it coming, and it's also too easy to say in hindsight that "they never should have been in this business in the first place."

But if there's a silver lining to the execution of this project, it's how fast they recognized the mistake and the willingness to sharply pivot back to a strategy right in their wheelhouse.

At business school, the entire curriculum was based around case studies. This is a pretty fascinating case: About business failure, yes, but also about trying to recover from that failure.

21 comments:

And you're right - this is a perfect opportunity for the type of "hindsight prophesizing" that so many of us (you and I included) dabble in.

I think a lot of us saw this coming as a bad idea. I know I would love to have ESPN content on my phone, but I have no intention of swapping phones, carriers, plans and possibly coverage zones just to get scores and news. I'll just use a PocketPC Smartphone and connect to the Internet for any updates I need.

That's the other major problem - with the increased reliability and speed of PDA Phones, Internet connectivity is no longer restricted to computers and $500 cell phones. Many carriers offer Internet connectivity for a small fee - who needs to pay even more to have it delivered straight to them when they can simply click on their favorite sites and find the same information for free?

I agree with Big D about the accessibility of the internet for updates.

I don't think I would have had a problem with switching carriers so much as I had a problem with the plans espn offered. I was really intrigued about getting it, but when I checked out how few minutes you got at each price point, it just wasn't competitive with the other carriers.

One other thing I thought was damaging to this whole enterprise was the way ESPN went about advertising it. The Superbowl spots (with the guy walking past a zillion athletes) were all well and good, but after that, they seemed to want to portray their audience as wackos, and I'm not sure why. Those commercials with the "ESPN groupie"? The guy who was hanging outside of the Bristol compound, ripping his clothes on the fence and having restraining orders taken out on him? That's the spokesguy who's supposed to convince me to switch phones? It looked to me like ESPN getting too big for its britches...I mean, the guy wasn't even a sports fanatic as much as he was an ESPN fanatic, and that's why he had the phone. And I think there was another, later set of ads, where basically the phone is interfering with the guy's life (he yells out during business meetings, confuses cab drivers, ticks off his wife, etc., because he's getting constant updates on the phone). I know ESPN is trying to reach out to the die-hards, but I don't see how putting idiots as die-hards in the commercial makes anyone want to invest in this phone and use it all the time.

And then there's all the "free" advertising, in the form of mentioning ESPN Mobile about 20 times per SportCenter, and having reporters call in on their phones instead of just appearing regularly, like some NFL guy is in a bunker in a Fallujah and can't get on the air. To me, at least, it really grated. They do the same thing with MNF, and it's such a hard sell that they're threating to turn SportsCenter into one 60-90 minute infomercial ("Watch MNF!" "Buy the phone!" "Go see a Disney movie!"). It's a turn-off, and they're hurting themselves with it.

Wait wait wait. You have a MBA from Harvard? Why has no one brought this up yet? Yeah yeah, ESPN was doomed to fail at switching people from their own networks, but Shanoff has a MBA from Harvard??? This is more deserving of a blog topic than ESPN Mobile failing. Who's with me?

For many Americans, the cell phone is the family umbilical cord. So, if I'm buying *any* plan, sports fan or not, I'm buying a plan that will cover the whole family at a reasonable price.

I also need to choose a plan that everyone in the family wants. Just because I want ESPN content on my phone, does that mean my wife and daughter want that stuff? No. Much as my wife is a huge football fan, she would not want a phone sending her scores and updates.

The promotional campaign was also an exercise in, "you don't want *that*". Showing the user, getting his updates during romantic dinners, dates, bedtime ... not the way you want to sell the product.

Why? Because guys will be thinking, "my wife would kill me if I did that". And wives/girlfriends would be thinking, "he'd better not have his ESPN phone with us on our date".

Seriously, how many people in the target audience would think having an ESPN phone available at all times would necessarily be a good thing? How many of us, as sports fans, are so addicted to live updates, that we can't go to the movies, or out with friends, or to the grocery store, without knowing that the Dodgers have scored while we were out?

Anyway, I agree with Dan and Big D ... the idea had so many established alternatives out there in the marketplace that it was somewhat doomed from the start.

I'm glad you mention this, Dan. Because ESPN's business model could be an MBA course unto itself.

Especially interesting is the contrast between ESPN Mobile and ESPN.com's Insider. I've often railed privately against Insider because it has advertisements and pop-ups. Compare it to HBO. HBO provides edgy content without the bother of commercials. You would think that Insider would have to offer the same type of content, but it doesn't at all. We get the same watered-down material with significant commercial intrusion.

Here's the key: HBO has to do that because it competes with networks and cable. Insider--and this is hard to believe with as vast as the Internet is--has surprisingly little competition. None of Fox, CBS, SI have the columnists/content. You get the headlines elsewhere but that's about it.

Now, as to ESPN Mobile, similar to Insider, I'm sure the egomaniacal Disney empire that invented Insider thought, "ESPN Mobile? People will fall all over themselves to get our content on their phones." The difference is that when I'm somewhere that I don't have TV or Internet access but want scores, I can get that without changing to ESPN Mobile.

Highlights are fungible, and most importantly, they can wait until I get home.

I put the ESPN Mobile attempt in the same class as Apple Computer in the mid-90s. Apple used to basically cater to those who already used Macs. They seemed disinterested in anyone who wasn't a hard core Mac fanatic. Then, they came out with the iPod, and Apple could get back to what it is good at which is creating products that people can enjoy using.

ESPN mobile catered to the hard core sports fan which is not where you make money. A company makes money by catering to the masses unless you have a super-niche product. I love sports and check my phone for scores and such, but I wasn't going to spend the kind of cash they wanted for the phone, and I wasn't going to switch to Sprint.

Now, as you said Dan, they can focus on the content which is what they do best. They will make much more money by taking a cut from the $4 to $7 per month that each service will charge for premium ESPN content.

In this scenario, they will appeal to the majority of sports fans who want information when they want it and to the hard core fan who they would have gotten no matter what kind of service they put out.

This reminds me of the same business mistake that Gateway made a few years ago, when they moved away from selling computers over the internet, opened a 180 physical stores across the country (which you could stranagely still only order computers over the internet) and started trying to sell cameras, televisions, printers, and many other alternate products. They lost a lot of money quickly, closed all 180 stores and finally shifted back to the original model.

ESPN made the same mistake that Hooters and many other companies have made. Hooters made a profit with restaurants, someone could go into Hooters have a chicken sandwich, fries, a drink or two and leave spending around $20. Then Hooters decided to open an airline hoping to capitalize on their name and image of fun. Buying $20 for a meal to enjoy the atmosphere at Hooters is completely different than spending $300 to fly on a plan with atmosphere. Those that patronize Hooters on a regular basis have no problem spending $20 here and there, however $300 different story. Most people do not pay ESPN directly for anything other than maybe Insider or the Magazine they except ESPN and content to be free (many may not realize that their cable or satellite bill is much higher due to ESPN). Asking someone to pay a large monthly fee for something they are use to getting for free is not going to work. Plus how many times have you eaten at Hooters and had bad food or food that is not really worth the price? When flying I want an established company, who specializes in flying and focuses on flying. Same with my cell phone, I want a company that won drop every single call (just 50% of my calls like Spring does for me in West Virginia).

-Scott

P.S. Dan MBA from Harvard can you write a recommendation letter for me for my PhD programs I am applying to? I could use blog postings and comments as a writing sample although not sure how they relate to Education Research Methodology

Back to people not paying for ESPN. I remember when Simmons' book came out. I was interested to read the sections pre-page2 but thought "I have never paid for Simmons' writing before and will never" and ended up reading those sections over 5 trips to the bookstore. Same thing with all EPSN content for me.

What gets me most is after all of the advertising, all of the SportsCenter plugs, and all of the ESPN Radio hosts mentioning the phones during segments on their shows Mobile ESPN only had 30,000 subscribers.

I believe you missed a critical point. People are also not willing to pay large amounts of money for constatn data streams. By going online with ESPN on your phone, customers rack up huge bills because of the content downloaded

One little point noone put out, and was a big NON-selling point for me. The phones where bulkier then cell phones pre-Miami Vice. Whenever I buy a phone, I usually go with the smaller the better. I do not carry a purse like most of you on the comments section, so I need something practical that will fit in my pocket, and you will NEVER see me walking around with a cell phone clip on my waist. Point blank, the cell phone you had to use was massive.

P.S. MBA from Hardvard, does that make me smarter for reading your posts?

As a subscriber to mobile espn, I am only paying $10/month more for this service than my other service, and since I was with sprint, my service area is remaining the same (though I do get more minutes with ESPN).

That said, I was upset when they announced they were ending service. It was anticipated, as I knew they were having troubles.

My phone was not bulky, as has been implied, and was often extremely super! I am a teacher and am often away from a television or computer, and, especially during college football or basketball seasons, I need to be connected to what is going on. The phone allowed me to sit at a middle school basketball game and not worry about the UNC game because I was watching it too! I also have season tickets to the 'Canes and I disliked having to miss the end of football games for hockey games. This phone took care of that. Even more, I could be sitting in staff development reading Forde's newest article!

I have never seen another cell phone with internet content that worked as smoothly as this one for watching games or simply playing the ESPN gamecast.

I wonder if those of you that are speaking ill of mobile espn have even seen the service... or maybe you just have more time than myself to sit around and watch tv?

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DanShanoff.com is a sports-blog spin-off of my long-time ESPN.com column, "The Daily Quickie." Anchored by an early-morning post of must-know topics, the blog is updated frequently throughout the day with new posts and user comments.